On-chain data indicates that Bitcoin investors have engaged in significant loss-taking as the asset’s price experienced a downturn.
Recent Surge in Bitcoin’s Entity-Adjusted Realized Loss
In a recent update on X, the on-chain analytics company Glassnode discussed the current trend in Bitcoin’s Realized Loss. The term “Realized Loss” refers to an indicator that quantifies the total amount of loss investors are ‘realizing’ through their transactions on the network each day.
This metric analyzes the transfer history of each coin sold on the blockchain, determining the previous price at which it was moved. If the most recent selling price of a token is higher than its current price, the sale is considered a realization of loss.
The Realized Loss metric calculates this loss as the difference between the two prices. It evaluates the losses involved in every transaction and computes the total for the network. There is a corresponding metric, known as Realized Profit, which tracks transfers that reflect profit.
Here is the chart shared by Glassnode illustrating the trend of Bitcoin Realized Loss over the past couple of years:
The indicator has shown a marked spike in recent days | Source: Glassnode on X
The chart shows the “Entity-Adjusted” version of Realized Loss, which only accounts for sales between distinct entities rather than just addresses. An entity is defined as a group of wallets identified by the analytics firm as belonging to the same investor.
Transactions between an investor’s addresses do not result in any loss or profit realization, so such transactions are excluded from the indicator’s data.
The data indicates that Bitcoin’s Entity-Adjusted Realized Loss has recently spiked significantly, suggesting that investors have conducted a considerable number of underwater transactions.
This capitulation event is a direct consequence of the recent bearish volatility experienced by BTC. During the initial crash, the metric reached an impressive $818 million, marking it as the second-largest loss-taking event of this cycle.
The only capitulation event where the indicator peaked higher was during last year’s yen-carry trade unwind, when total realized losses hit $1.34 billion.
Historically, widespread sell-offs, during which investors capitulate, have typically resulted in bottoms for Bitcoin, as tokens shift from weaker to stronger hands. It remains to be seen whether this surge in Realized Loss will have a similar impact on the cryptocurrency this time around.
Current BTC Price
As of this writing, Bitcoin is trading around $90,300, reflecting an increase of nearly 7% over the past week.
The coin's price appears to be recovering from its recent crash | Source: BTCUSDT on TradingView
Featured image from Dall-E, Glassnode.com, chart from TradingView.com
